2003 Annual Report
A b ou t U n i v i s i o n Univision Communications Inc. ( Univision ) is the leading Spanish-language media and entertainment company in the United States. It owns and operates two national broadcast television networks, a national cable television network, 56 broadcast television stations, a music recording and publishing company, and an Internet portal. Following the September 2003 acquisition of Hispanic Broadcasting Corporation and the subsequent acquisition of four additional stations, Univision also owns and operates 72 broadcast radio stations. Univision media reach virtually all of the more than 38 million Hispanics living in the United States. Univision holds a 50% interest in Disa, a company specializing in regional Mexican music, and a non-voting interest in Entravision Communications Corporation, a public, Spanish-language media company that is the largest affiliate of Univision s broadcast television networks. Univision s headquarters are located in Los Angeles, California. The company s stock (UVN) is traded on the New York Stock Exchange. Univision s four areas of operation are described below. Television Univision Network: the nation s most-watched Spanish-language broadcast television network, reaching 98% of U.S. Hispanic television households. TeleFutura Network: the nation s newest 24-hour, general-interest, Spanish-language broadcast television network, reaching 79% of U.S. Hispanic television households. Galavisión: the nation s leading Spanish-language cable television network, reaching 5.7 million U.S. Hispanic cable households. Univision Television Group: the owner and operator of 17 full-power and 7 low-power television stations that form the core distribution for Univision Network, plus 1 full-power television station that broadcasts UPN. TeleFutura Television Group: the owner and operator of 18 full-power and 13 low-power television stations that form the core distribution for TeleFutura Network. Radio Univision Radio: the leading U.S. Spanish-language radio broadcaster, which owns and operates 68 radio stations in 17 of the top 25 U.S. Hispanic markets and 4 radio stations in Puerto Rico. Music Univision Music Group: the nation s leading Latin music recording company and a publisher of Latin music. Internet Univision Online: the owner and operator of univision.com, the most-visited U.S.-based Spanish-language Internet portal, with more than 1.6 billion page views per year.anish-language Internet portal, with more than one billion page views per year. 1
To O u r St o c k h ol d e r s Univision had a highly successful year in 2003. We increased our net revenues by 20%, our net income was $155 million, and we substantially strengthened our balance sheet even though 2003 was the third consecutive difficult year for advertising revenue-driven businesses. The year was also notable for the completion, on September 22, of Univision s acquisition of the leading U.S. Spanish-language radio group, Hispanic Broadcasting Corporation ( HBC ), which has since been renamed Univision Radio. We had long believed that combining HBC with Univision made great strategic sense. With the acquisition complete, we look forward to capitalizing on the unique combination of Spanish-language media assets we now hold in our portfolio. Our stockholders should soon see the synergistic and cross-promotional benefits of this acquisition reflected in our operating results. Television Operations Each of our television networks Univision Network, TeleFutura Network, and Galavisión had an outstanding year. Univision Network, which is the leading U.S. Spanish-language broadcast network, reaching 98% of U.S. Hispanic television households, once again attracted record audiences by delivering the most popular Spanish-language programming available in the U.S. TeleFutura Network, which we launched as a new broadcast network in early 2002, now reaches 79% of U.S. Hispanic television households. Delivering record audience levels during 2003, TeleFutura Network was often the #2 Spanish-language network, second only to Univision Network. Galavisión, our cable network, also experienced outstanding growth during the year and continues to be far and away the leading U.S. Spanish-language cable network, with more than double the distribution of its nearest competitor. This was also an excellent year for Univision Television Group and TeleFutura Television Group. On a combined basis, these station groups own and operate 55 Spanish-language television stations. Univision Television Group also owns one station that carries English-language programming and operates two more stations in Puerto Rico. We enjoy the benefits of duopoly ownership in 15 markets. Univision Radio The acquisition of HBC brought into our family as Univision Radio a total of 64 owned-andoperated stations in 17 of the top 25 U.S. Hispanic markets and 4 stations in Puerto Rico. Univision Radio recently acquired 4 additional stations in the U.S. This leading station group, 2
with the strong management team that came with it, provides Univision with a new avenue of growth. We now have multiple proven media platforms, which we believe will accelerate the rate at which advertisers take advantage of the benefits offered by Spanish-language marketing campaigns. Cross-promotional opportunities should enhance each of the platforms. Univision Music Group In 2003, we continued to build on the strength of our 2002 acquisition of Fonovisa Records and our 2001 acquisition of 50% of Disa. In the final Billboard issue of 2003, Univision Music Group, which comprises Univision Records, Fonovisa Records, and Disa Records, captured the award for Top Latin Album Label of the Year, displacing long-time leader Sony Discos, as well as Top Regional Mexican Album Label. Also, Fonovisa Records, the #1 Hot Regional Mexican Airplay Label, had the Top Regional Mexican Album of the year, Los Tigres del Norte s Herencia Musical: 20 Corridos Inolvidables. Although we are not immune to piracy and other problems facing the music industry as a whole, the management team at Univision Music Group continues to turn in outstanding performances. Univision Online Univision Online provides an important link with our other media businesses. During 2003, univision.com widened its lead as the most-visited U.S.-based Spanish-language Internet portal. It extends the Univision experience from television, radio, and music to the Internet and offers further opportunities for cross promotion with all our lines of business. Community Service At Univision our commitment goes beyond providing the best available entertainment and news programming. We believe we have a duty to deliver information and other assistance that will directly benefit the communities we serve. During 2003, we sponsored numerous informational initiatives, including several dealing with education and citizenship matters. In November, we launched a major five-year initiative designed to improve the health of U.S. Hispanics Salud es Vida Entérate! Univision is working with community organizations and health care providers to advance the mission of this initiative, which is to promote healthy lifestyles and encourage early detection and management of chronic health conditions affecting U.S. Hispanics. This effort has received plaudits from community and political leaders throughout the U.S. 3
The Keys to Univision s Success Univision s success story has resulted from a combination of the hard work of our employees, the loyalty of our audiences, and the outstanding entertainment and news programming we have been able to provide through our own efforts and the efforts of our major programming partners, Televisa and Venevision. We are pleased that Gustavo A. Cisneros, Chairman of Cisneros Group of Companies, which includes Venevision, rejoined our Board of Directors in 2003. Also joining the Board during 2003 were McHenry T. Tichenor, Jr., of Univision Radio, and Fernando Aguirre, and Chief Executive Officer of Chiquita Brands International, Inc. Univision benefits greatly from the wise counsel provided by its Directors. The Challenges Ahead Completing the successful integration of Univision Radio with the rest of our businesses will be a focus of management during 2004. The cultures and values of Univision and the former HBC are similar, and the integration is off to a strong start. There is, however, much more to be done to assure that we capitalize on the full value of the combination. Increasing competition, especially in our core television business, will also command substantial attention from Univision management in 2004 and beyond. The rapid growth and emerging prosperity of the U.S. Hispanic population make our target audience attractive to others as well as to us. We enjoy at present an enormous advantage in this competitive scene the loyalty of U.S. Hispanics to the Univision brands, which results from our history of delivering strong entertainment and news programming as well as our deep commitment to the U.S. Hispanic community and its needs. We will work ferociously to retain that loyalty. This means we will continue to elevate the quality of our entertainment and news programming and continue to expand our commitment to the U.S. Hispanic community. I wish to thank the Univision family for its hard work, our audiences for their loyalties, and you, our stockholders, for your confidence in management s stewardship of Univision s resources. A. J e r r o l d P e r e n c h i o Chairman of the Board and Chief Executive Officer 4
B oa r d o f D i r e c t or s C or p or at e I n f or m at i o n A. Jerrold Perenchio Chairman of the Board and Chief Executive Officer Univision Communications Inc. Emilio Azcárraga Jean Vice Chairman of the Board Univision Communications Inc. Chairman, and Chief Executive Officer Grupo Televisa, S.A. Ray Rodriguez Univision Network TeleFutura Network Galavisión McHenry T. Tichenor, Jr. Univision Radio Fernando Aguirre and Chief Executive Officer Chiquita Brands International, Inc. Gustavo A. Cisneros Chairman and Chief Executive Officer Cisneros Group of Companies Harold Gaba and Chief Executive Officer ACT III Communications Holdings, L.P. Alan F. Horn and Chief Operating Officer Warner Bros. John G. Perenchio Ultimatum Music, LLC Alternate Directors Alfonso de Angoitia Executive Vice and Chairman of the Finance Committee Grupo Televisa, S.A. Alejandro Rivera Director and Venevision International Corporation Corporate Headquarters Univision Communications Inc. 1999 Avenue of the Stars Suite 3050 Los Angeles, CA 90067 (310) 556-7676 Independent Auditors Ernst & Young LLP 5 Times Square New York, NY 10036-6530 Stock Prices Transfer Agent and Registrar The Bank of New York Stockholder Relations Church Street Station P.O. Box 11258 New York, NY 10286-1258 (800) 524-4458 The Class A Common Stock of Univision Communications Inc. ( Univision ) is listed on the New York Stock Exchange under the symbol UVN. As of February 13, 2004, there were 301 Class A, five Class P, two Class T, and two Class V stockholders of record. No cash dividends were paid on any class of Univision s common stock in 2002 or 2003. Univision has a bank facility that restricts the payment of cash dividends on the common stock. Below are the New York Stock Exchange high and low sales prices (a) of Univision s Class A Common Stock for each quarter of 2003 and 2002. 2 0 0 3 2 0 0 2 Post-Split Pr ices High Low High Low E x e c u t i v e O f f i c e r s A. Jerrold Perenchio Chairman of the Board and Chief Executive Officer Robert V. Cahill Vice Chairman and Secretary of the Corporation Ray Rodriguez Univision Network TeleFutura Network Galavisión McHenry T. Tichenor, Jr. Univision Radio George W. Blank Executive Vice and Chief Financial Officer Andrew W. Hobson Executive Vice C. Douglas Kranwinkle Executive Vice and General Counsel First Quarter $28.65 $21.83 $47.00 $32.25 Second Quarter $32.32 $24.15 $44.89 $26.40 Third Quarter $38.64 $28.86 $31.92 $16.40 Fourth Quarter $39.95 $31.50 $33.48 $19.97 (a) The high and low sales prices are based on intraday trading. Corporate Governance Guidelines Univision s Corporate Governance Guidelines are available on Univision s corporate website at www.univision.net.you may obtain a copy of Univision s Corporate Governance Guidelines without charge through Univision s corporate headquarters. Forward-Looking Statements This annual report contains forward-looking statements that involve risks and uncertainties, including those relating to Univision s future success and growth. Actual results may differ materially due to risks and uncertainties as described in Univision s filings with the Securities and Exchange Commission. Univision assumes no obligation to update forward-looking information contained in this annual report.